* Pound rides high as traders brace for British election
* Trump to meet advisers on China tariffs
* Dovish Fed message sees dollar touch lowest since August
* Treasury yields rebound in Asia
By Marc Jones
LONDON, Dec 12 (Reuters) - World shares took a fresh run at
record highs on Thursday, as all the right messages from the
U.S. Federal Reserve set traders up nicely for a packed day of
milestone central bank meetings and a Brexit-defining election
in Britain.
The Fed kept U.S. interest rates unchanged, as expected, but
it was a message that it would take an unexpected and
"persistent" rise in inflation to lift them again that buoyed
the bulls and shoved the dollar to its lowest since August.
It helped Asian shares rally almost 1%, despite reports
Washington will press on with new China tariffs, and solid
0.2%-0.5% gains in Europe early on left MSCI's broadest index of
world shares .MIWD00000PUS just 0.1% shy of its January 2018
all-time high.
"The Fed's accommodative stance does support equities, but
the chance of a disruptive election outcome in Britain is very
real," said Michael McCarthy, chief market strategist at CMC
Markets in Sydney.
Traders are bracing for a series of make-or-break events
over the next few days that have the potential to cause huge
swings in financial markets for months to come.
Sterling was hovering at its highest in more than two years
versus the euro and close to an eight-month high versus the
dollar as voting began in an election that will determine
whether Britain exits the European Union next month.
Expectations are that the ruling Conservatives, led by Boris
Johnson, will score a majority that allows his Brexit deal to be
passed by a new parliament, but the latest polls have shown the
lead shrinking.
Exit polls for Britain's election will begin around 2200
GMT, after voting closes, with clarity over whether their will
be a clear winner or another hung parliament likely between 0400
GMT and 0600 GMT. Following a 10% surge by the pound in the last few months,
Traders and investors are now hedging their bets. Union Bancaire
Privée's Global Head of Forex Strategy Peter Kinsella said a
Conservative majority remained his expectation, however.
"We think a move to levels of around $1.35 or even $1.37 is
entirely feasible," if there is a decent Conservative majority,
whereas with another hung parliament "you are definitely back
down to $1.26-1.27."
It was last at $1.3205 GBP=D3 , just shy of its highest
since March and close to a May 2017 peak against the euro at
84.32 pence EURGBP= .
The euro EUR=EBS was also climbing against the weakened
dollar. It rose as far as $1.1144, close to a five-week high
before Christine Lagarde's first meeting as President of the
European Central Bank.
She is almost certain to keep rate rates on hold, but her
style and signals will be closely watched by economists,
especially with the bank due to update its forecasts and make
some changes to its policy framework next year. Switzerland's central bank had got up early and already held
its rate meeting meanwhile. Negative interest rates remain
central to its plans, the SNB's Chairman Thomas Jordan said as
it maintained its ultra-expansive monetary policy. The Swiss
franc barely budged.
There were fresh U.S.-China developments to digest too.
U.S. President Donald Trump is expected to meet top advisers
on Thursday to discuss tariffs on nearly $160 billion of Chinese
consumer goods that are scheduled to take effect on Dec. 15,
three sources told Reuters. Trump is expected to go ahead with the tariffs, a separate
source told Reuters, which could scuttle efforts to end a
17-month long trade dispute between the world's two-largest
economies.
The dollar index .DXY against a basket of six major
currencies fell 0.3% to 97.057, briefly touching a new
four-month low.
Treasury yields had fallen in reaction to the Fed's
comments, but they rebounded slightly in Asia and Europe. The
yield on benchmark 10-year Treasury notes US10YT=RR rose to
1.7966%.
In commodities, U.S. crude CLc1 edged up 0.15% to $58.85 a
barrel. Brent crude LCOc1 rose 0.39% to $63.97 per barrel. A
report by OPEC released on Wednesday suggested that oil markets
are tighter than previously thought. Traders are also focused on state oil company Saudi Aramco
2222.SE . Its value brushed $2 trillion shares on Thursday as
its shares surged again following its Riyadh stock market debut
on Wednesday.
Sterling vs. odds of Conservative majority in 2019 election https://tmsnrt.rs/2YHhmpw
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